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Brazil's President Dilma has her work cut out for her now as popular protests against the rising cost of living and poor public resources could kick her Workers Party out of the Presidency next year after running the joint since 2003.

Brazil's Workers' Party government has its work cut out for them. The country is mired in its biggest mass protests since 1992, when millions demanded the ouster of crony capitalist president Fernando Collor.

No one is demanding the impeachment of Workers' Party (PT) front-woman and the nation's president Dilma Rousseff. But she is up for re-election next year. Dilma supports the protesters because she has to. Not only was she once an anti-right wing guerrilla leader in the 1960s, but going against popular opinion which is in favor of the protesters would ultimately destroy the PT brand and kick them out of office after running the place for nearly 12 years.

What started as a protest over bus fare hikes last Thursday has turned into an anti-government, anti-FIFA World Cup, anti-Olympics free-for-all of millions taking to the streets nationwide asking the government to play fair. Brazil is a country where the majority have been paying for a full glass and getting it half empty, for decades. A slower economy and the glitz of the coming FIFA World Cup in 2014 exacerbates the problem.

And so now the PT is in a tug of war with itself, says Marcelo Salomon, an economist at Capital in New York.

They are in a tough spot, dealing with two large sources of pressure that could ultimately demand very different styles of reaction. On one side, there is social unrest demanding better use of public money. But on the other side, Brazilian financial asset prices are in a tailspin, amplified by the social unrest and with deep roots in what investors by and large see as a lack of fiscal control that's put Brazil on the route to sovereign credit downgrades.

The popular protests that started with the so-called Free Bus Fare Movement last week intensified last night, with the first death reported in São Paulo state. The catalyst of this movement is still an open question. However, it is very likely that the growing disconnect between government actions and society’s needs was a sufficient condition to protest, Salomon points out.

"The very violent way that authorities dealt with the Bus Fare Movement was probably the straw that broke the camel's back," he says. "We view these protests as a wake-up call that the government needs to continue catering to the new demands of the rising middle class. It is not enough to increase social transfers or create stimulus programs to push consumption up. Brazilians are now clamoring for a leaner and more efficient government, one that spends tax revenues in a sound manner, according to their needs."

Brazilians are some of the most highly taxed people on Earth, with little to show for it in terms of social safety nets and public infrastructure. While the São Paulo subway system may be clean, it is woefully small in comparison to New York City, which is much smaller than São Paulo. The bus system is even worse, stuck in traffic and completely overcrowded.

Frustration over Brazil's lackluster public resources for schools and affordable medical centers, too, has reached a tipping point this week. Something's got to give.

While the PT government has spent much of the last decade transferring wealth to the poorest of the poor in the northeast, and necessarily so, it has neglected the middle class, which until now was a minority. As their needs fail to be met and costs skyrocket, being nickled and dimed is not going over well. It's even worse when FIFA and millionaire soccer players are getting shiny new soccer stadiums. Protesters are often seen holding signs saying they want money for schools like the money that is being spent to renovate stadiums for World Cup soccer.

One of the larger difficulties for PT at this moment is that there is no leadership to negotiate, and no concrete claims to deliver on, Salomon says. Bus fares had already been cut back before yesterday’s demonstration, but this did not prevent the protests from continuing.

Moreover, new protests are already being planned for the coming days, with some calling for a general strike at some point next week.

The government has not commented on the latest movements, but there is a considerable risk that grassroots pressures from within the PT party will claim that more fiscal spending in health, security and education will be the way to go.

If not, PT risks destroying the legacy of Luiz Inacio Lula da Silva, who brought PT to power when he was elected on economic discontent with the Social Democrats, another liberal party, 11 years ago.

Salomon warns that taking this new spending route would only amplify the concerns of the other source of pressure on the government: the ongoing sell-off of Brazilian financial assets by investors.

"The government may not be able afford to turn a blind eye to financial markets and address only the street protests," he says. Investors have been selling out of Brazilian local bonds. The currency is down 12% against the dollar since May. Inflation remains a sticking point and requires tighter monetary policy. Adding to this, the negative wealth effects driven by the current market sell-off and a likely drag on sentiment -- both consumer and business alike -- should push domestic demand down.

"It is critical that the government take swift action to address both sources of pressure," Salomon says. "We think it needs to start with a credibility shock. Until this happens, even if global markets take a pause, we believe Brazil's asset prices will continue to underperform those of its peers, especially those like Mexico, that have been pushing ahead with structural reforms."